Scrutiny reveals flaws in system

Horticulture Innovation, Meat and Livestock Australia, Australian Wool Innovation, Grains Research Development Corporation and Cotton Research Development Corporation collected $522 million revenue in 2016-17

THE nation’s agricultural think tank chief believes weakness surrounding oversight and transparency of levy management is diminishing the strength of the country’s rural Research and Development Corporations.

The structures that underpin Australia’s agricultural levy system are known to be complex, convoluted and at times, in some industries, lack accountability.

The complexities of the systems have been evident at every stage of Fairfax Agriculture Media’s questioning surrounding the collection of levy rates, investment decision-making, extension and return, and representation and oversight.

Australian Farm Institute executive director Mick Keogh said the levy model for agricultural research, which had been in existence for over a quarter of a century, no longer produced the benefits it had in the past and change was needed to take advantage of accelerating global food demand.

He said the two major areas of concern related to informing levy payers of investments, and the accountability enforced by industry groups’ oversight bodies.

“It is fair to say say the standard of information going back to levy payers from the RDCs is patchy and not always in a form that makes a great deal of sense to levy payers,” Mr Keogh said.

“Ultimately it comes to the point where growers essentially are asked to make judgement about whether the levels of levy they are paying is appropriate or not.

“I’m not sure they have always had meaningful information available to be able to make those decisions.

“There is room to greatly simplify the information provided and to quantify it a lot more.”

A report by AFI stated every one per cent productivity gain is worth $500 million a year to the Australian agriculture sector, or $4200 a year for the average farm.

Mr Keogh said levy’s return on investment must be based on robust economics, which detail the returns generated from R and D investments, and innovations developed, commercialised and adopted, in simple terms.

Times change

The current RDC model was an initiative of the Labour government, under Minister for Primary Industries, John Kerin, in the late 1980s.

In Mr Kerin’s self authored 2013 memoir, the minister said when he came to government the old system needed updating.

“The policy intention for research in the 1980-90s was to make the agricultural sector more resilient and to pursue economic and technical efficiency, productivity gain and profitability for everyone’s benefit,” he stated.

Mr Kerin said vested interests, multiple peak bodies and politics had been interfering with successful investment in research.

That puts them in a potentially compromised position because how critical are you going to be of the very organisation that delivers the funding you need to operate. - Mick Keogh, AFI

Mr Keogh said reviewing the Kerin memoirs showed the changes in the landscape over the last 30 years, particularly the reduced number of representative organisations.

This, he said resulted in a situation where RDCs lacked profit accountability compared to commercial entities.

“Representative organisations have had a dramatic shrinkage in relations to the resources they have available and that means their ability to scrutinise the performance of their RDC is greatly diminished,” he said.

“They have become more and more dependent on funding derived from the RDCs in one form or another.

“That puts them in a potentially compromised position because how critical are you going to be of the very organisation that delivers the funding you need to operate.

“That weakness has crept into the RDC model.

“These are the issues that need addressing.”

Peak body view

National Farmers Federation (NFF), president, Fiona Simson said the NFF was of the firm view that the current agriculture industry levy collection and investment arrangements were an extremely valuable joint effort between government and industry.

“Australian farmers have consistently found productivity improvements greater than other sectors of the economy through their commitment to innovation, environmental stewardship and their willingness to adapt to changing community expectations,” she said.

“Much of this performance can be attributed directly to their ongoing investment in research and development through the RDC model.”

Ms Simson said there were many examples, across many industries of how, research and development had assisted to increase productivity and profitability.

One example, Ms Simson said was the improvement of water use efficiency across the grain industry of between 50 and 100pc in the past three decades achieved through joint programs between the Grains Research and Development Corporation and CSIRO.

“Overall, Australian grain growers are up to twice as water efficient as they were 30 years ago – this is despite a 5-30pc decrease in growing season rainfall since the 2000s,” she said.

Ms Simson said Australian cotton growers were world leaders in water use efficiency.

“Australia's cotton growers produce more crop per drop than any other cotton producing country,” she said .

“Our cotton industry has achieved a 40pc increase in water productivity over the last decade, as a result of science funded through the farmer, government partnership that is the Cotton Research and Development Corporation.”

Ms Simson said the NFF believed the broad architecture for public and rural R and D was about right.

“The challenge is to make sure the agricultural innovation system works, the research effort is maintained and the system can deliver the innovation required,” she said.

Throughout December, Fairfax Agricultural Media will investigate and compare how five organisations manage its revenue and whether the model still delivers the best result to growers and the public taxpayer.